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Whitehouse held title to the 28 lots, provided financing to the
Kramers, and received 96 percent of the net proceeds from the
sale of the lots, while the Kramers performed all activities
necessary to develop, market, and sell the lots and received 4
percent of the net proceeds. During 1993 and 1994, the developed
lots were sold to home buyers.
OPINION
Respondent contends that Whitehouse's share of the 1993 and
1994 proceeds relating to the sale of the 28 lots was ordinary
income. Petitioner contends that the proceeds were capital gain.
Under section 1221(1), the term "capital asset" does not include
property held by a taxpayer primarily for sale to customers in
the ordinary course of the taxpayer's trade or business.1 There
is no fixed formula or rule of thumb for making this
determination, and each case must rest upon its own facts. See
Kaltreider v. Commissioner, 255 F.2d 833, 838 (3d Cir. 1958),
affg. 28 T.C. 121 (1957); see also Mauldin v. Commissioner, 195
F.2d 714, 716 (10th Cir. 1952), affg. 16 T.C. 698 (1951).
Although HJV originally acquired the Marlboro tract to build
single-family homes to be sold in the ordinary course of its real
estate development business, Whitehouse, as HJV's successor, did
1 All section references are to the Internal Revenue Code
in effect for the years in issue, and all Rule references are to
the Tax Court Rules of Practice and Procedure.
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